Dear Sally,
I recently opened a Wal-Mart credit card and also a new account at AT&T. My credit score has drastically dropped. As far as my credit card goes, I make a payment every two weeks instead of monthly. Can you give me tips on how I can bring my score back up? – Trudi
Dear Trudi,
Something is wrong if you have seen a drastic drop in your score while keeping your payments current. What you describe should have had only a minor impact.
Let’s look at what should have happened to your credit with your new accounts. Typically, when you apply for a new credit card or service that requires a credit check, your credit score takes a small, temporary hit due to the hard pull of your credit report to determine if you qualify for the card or service. You probably expect credit card issuers to check your creditworthiness, but many people don’t realize that a new cellphone account comes with a credit check, too.
So you took a bit of a credit score hit with these two new accounts – probably no more than five points each. As time marches on, the impact fades. Credit report hard pulls disappear in two years from your credit report.
What also may have contributed to a score drop is that whenever you apply for new credit, your “length of credit history” is shortened, which accounts for 15 percent of your FICO score. By opening the new card, you effectively shortened the overall age of all of your accounts. To understand this credit scoring quirk better, read “How average credit account age affects your credit score.” How much of an impact it has will depend on how much other credit you have. If your credit history is short, and you have few other accounts, the impact will be greater.
But even with those two factors combined, it should have been a minor impact, not a dramatic one.
That leaves a puzzle that needs solving. If you’re not late with your payments and you keep your credit utilization low, something else is causing the drastic drop. You need to find out what it is. Pull your credit reports from annualcreditreport.com. By federal law, credit bureaus must provide consumers with a free report once a year, and that site gets you the reports from each of the three big credit bureaus.
Closely examine your credit reports. There could be errors, or someone could be fraudulently opening accounts in your name. Also pull your credit score. Like many other cards, Wal-Mart gives you a free FICO score as a benefit. Along with your score will come an analysis showing why your score is the way it is. By pulling your credit reports and scores, you should have a clear picture of what went wrong.